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Some stylized facts of returns in the foreign exchange and stock markets in Peru

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  • Humala, Alberto

    (Banco Central de Reserva del Perú)

  • Rodriguez, Gabriel

    (Pontificia Universidad Católica del Perú)

Abstract

Some stylized facts for foreign exchange and stock market returns are explored using statistical methods. Formal statistics for testing presence of autocorrelation, asymmetry, and other deviations from normality is applied to these financial returns. Dynamic correlations and different kernel estimations and approximations of the empirical distributions are also under scrutiny. Furthermore, dynamic analysis of mean, standard deviation, skewness and kurtosis are also performed to evaluate time-varying properties in return distributions. Main results reveal different sources and types of non-normality in the return distributions in both markets. Left fat tails, excess kurtosis, return clustering and unconditional time-varying moments show important deviations from normality. Identifiable volatility cycles in both forex and stock markets are associated to common macro financial uncertainty events.

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Bibliographic Info

Paper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2010-017.

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Date of creation: Dec 2010
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Handle: RePEc:rbp:wpaper:2010-017

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Keywords: Non-Normal Distributions; Stock Market Returns; Foreign Exchange Market Returns.;

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  1. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  2. Mauricio Zevallos, 2008. "Estimación del riesgo bursátil peruano," Revista Economía, Departamento de Economía - Pontificia Universidad Católica del Perú, issue 62, pages 109-126.
  3. Mills,Terence C. & Markellos,Raphael N., 2008. "The Econometric Modelling of Financial Time Series," Cambridge Books, Cambridge University Press, number 9780521710091, October.
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